NOF Corporation - Company History

A general chemical company built from oils, soap, paint and explosives — and its re-establishment in 1949

In 1937 four companies — Nihon Shokuryo Kogyo, the Fuji Paint Works of Kokusan Kogyo, Velvet Soap and Godo Yushi — were merged under the Nissan zaibatsu to form Nippon Oil & Fats Co., Ltd. 日本油脂[1]. Its predecessor was Standard Yushi Co., established in 1921, the firm that had brought the hardened-oil industry into being in Japan[2]. Standard Yushi was renamed Godo Yushi in 1931, and its site — later the Oji works — became the nucleus of the merged company[3]. The merger created a general chemical company running oils, soap and paint as a single operation, and by 1943 it had absorbed several further firms, among them Teikoku Kayaku Kogyo Co.[4] The Mikuni works (paint) and the Shinmei works (welding rods) were added as well[5], and a base for chemicals across the board, worked outward from oils, was set in place.

In 1945 the company took over the chemicals division of Nippon Mining Co. by business transfer and renamed itself Nissan Chemical Industries, Ltd.[6] Following the dissolution of the zaibatsu after the surrender and the reorganisation ordered under the Enterprise Reconstruction and Reorganisation Law, in July 1949 the four businesses — oils, paint, explosives and welding rods — were separated out into a second company, and Nippon Oil & Fats Co., Ltd. was re-established under the old name[7]. It listed on the Tokyo Stock Exchange in September of the same year[8]. At re-establishment it employed some 3,000 people and held domestic shares of 32 per cent in oils (first), 10 per cent in paint (second) and 31 per cent in explosives (second) — a diversified chemical portfolio on its back as it put out into the post-war market economy.

The structural crisis of an oils business that was six-tenths of sales, and the move into petrochemicals

Through the post-war recovery the oils business grew as a feedstock for soap, but while competitors attacked the finished-goods market with advertising, Nippon Oil & Fats — which confined itself to supplying raw material — was drawn into price competition. The weakness of an earnings structure that leaned so heavily on feedstock for soap came into the open: losses ran for three half-years in succession — $458,333 (¥165m) in the half-year to November 1956, $216,667 (¥78m) in the half-year to May 1957 and $180,556 (¥65m) in the half-year to November 1957[9]. Sales stalled between $14.2M (¥5bn) and $15.6M (¥6bn), and rebuilding became the task before president Ohashi Taiji (大橋退治)[10]. Less than ten years after re-establishment, the structural weakness of businesses drawn from many sources and held together by merger stood exposed.

In 1961 Nippon Oil & Fats decided to enter petrochemicals and built the new Chidori works in Kawasaki[11]. The design was to buy petroleum feedstock from Nippon Petrochemicals, which had a base in Kawasaki, and to switch from natural glycerine derived from oils and fats to synthetic glycerine — a move against the structural change in the by-product market. Earnings returned to profit in the half-year to May 1958, and by the half-year to November 1961 had recovered to sales of $23.6M (¥9bn) and net profit of $975,000 (¥351m), but that was the peak: by the half-year to November 1965 profit had thinned to $86,111 (¥31m)[12]. The absorption of Teikoku Kakohin Seizo Co. in June 1970[13] strengthened the base in explosives and industrial chemicals, yet the fragility of an earnings structure led by oils remained a structural problem into the 1970s.

Structural problem or not, this period also saw modernisation of plant and diversification proceed together. In 1954 the new Bibai works was built in Hokkaido to modernise equipment, improve quality and raise output[14]; alongside the 1961 move into petrochemicals the company commercialised explosive forming of metal sheet and extended into metallurgical machinery[15]. In 1964 it set up Nippon Lubrizol Kogyo, a joint venture with The Lubrizol Corporation of the United States, taking it into lubricant additives, and in August of the same year built the new Totsuka works in Yokohama — said at the time to have the finest equipment in the Orient — to meet rising demand for paint[16]. Each division ran on its own profit and loss account, so that the oil chemicals, edible oils, household products, paint, explosives and welding divisions stood side by side[17]. In the half-year to November 1967 the company posted sales of just over $38.6M (¥14bn) and net profit after tax of $555,556 (¥200m), and kept up a 10 per cent annual dividend[18] — but the thin returns that came with an oils-led business persisted.